BI official expects SBI rate to fall this week
BI official expects SBI rate to fall this week
JAKARTA (JP): Bank Indonesia senior deputy governor Anwar
Nasution expects the benchmark interest rate on Bank Indonesia
one-month SBI promissory notes to decrease at the weekly auction
on Wednesday.
Anwar said the condition was ripe for the interest rate to
drop.
"There have been signs for the (SBI) interest rate to drop,"
Anwar announced following a meeting with senior economic
ministers.
"We hope that the condition continues to improve so that the
interest rate can further decrease," he added.
He said the near completion of the country's bank
recapitalization program was crucial to reducing interest rates.
The government has completed the bank recapitalization program
with the exception of Bank Bali, which is expected to be
completed next month.
The central bank allowed the benchmark interest rate to
increase over the past couple of months amid the weakening of the
rupiah. But the interest rate on one-month SBIs was unchanged
last week at 13.52 percent.
Analysts have said that the recent strengthening of the rupiah
was a primary factor for Bank Indonesia to allow the interest
rate to remain the same or decrease.
The interest rate on three-month SBIs dropped to 13.29 percent
last week from 13.49 percent previously.
The central bank said earlier that it wanted to see the
benchmark interest rate at about 12 percent by the end of this
year.
A rise in SBI rates would increase the burden on the state
budget to finance the payment of interest on government bonds
issued to help finance the country's bank recapitalization
program. Some of the bonds carry variable interest rates linked
to SBI interest rates.
Asked on the direction of the rupiah, Anwar said that he
expected the local currency to strengthen amid the improving
domestic political climate.
"Looking at the economic fundamentals, there's no reason for
the rupiah to weaken," he said.
Anwar said that the move by the central bank to curb
speculators by sending its inspectors to foreign exchange banks
to make sure they abide by the existing prudential rulings had
been effective in stabilizing the local unit.
Anwar warned recently that foreign currency dealers and
bankers who violated the ruling would be deported. He added that
local bankers found guilty would be banned from entering the
country's banking industry for the rest of their lives.
The rupiah has been strengthening since Wednesday last week
amid easing political tension between President Abdurrahman Wahid
and the country's top legislators.
The local unit continued to strengthen on Monday to close
higher at about Rp 8,200 per U.S. dollar in late trading compared
to Rp 8,345 per dollar on Friday.
The rupiah dropped to a 21-month low of Rp 9,570 per dollar
last month amid political uncertainty. (rei)